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tv   Closing Bell  CNBC  January 16, 2013 3:00pm-4:00pm EST

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this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping at fedex office. herbalife shares are popping. they are moving up to -- well, they are moving up to break even right now as dow jones is reporting carl icahn is telling other investors he has taken a stake in herbalife. what is he making of this? >> don't put the "h" in herbal. >> what can i tell you, it's australian. >> another guy coming in to i believe bet against bill ackman rather than having done the fundamental analysis to see whether this is a company they want to earn over the long term. so much controversially. >> ackman could get his derriere handed to him here. >> and i think everyone may end
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up winning in this one. you watch. >> everyone wins. that's the new america. everyone's a winner. >> we're all special. >> thanks for watching "street signs," everybody. >> "closing bell" is next. >> hi, everybody. good afternoon. into the final stretch. welcome to the "closing bell." i'm maria bartiromo at the new york stock exchange. the dow's five-day winning streak looks to be in jeopardy, bill. >> watch that in the final hour. i'm bill griffith where you do pronounce the "h." dell dragging the dow lower and dreamliner grounding planes after an emergency landing. more on that developing story coming up in a little bit. >> dimon roughed up a bit, jamie dimon's compensation takes a by the due to the hits they suffered due to the so-called london whale. >> banking sector did pretty well today. >> overall, and it was a merry christmas for ebay. we're going to find out. those earnings will hit just
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after the bell about an hour from now. holiday sales will tell the story. we'll have what it means, the instant analysis as soon as the numbers are released. >> first let's get you caught up on the market in the final stretch. dow jones industrial average down about 24 points. very much a steady administration for the last hour or so. 13,510, last trade on the blue chip average and nasdaq composite moving higher. real momentum in tech today. the highs are just, yeah, right at the highs right now with a 13-point move on the upside. nasdaq and s&p 500 higher by just about a point. is the dow set to break that five-day winning streak though? >> let's talk about that among other things in today's "closing bell" exchange. we welcome back our guests, including our own rick santelli and steve liesman. it's all about the fiscal cliff in that report, isn't it? >> taken by itself not a bad report, moderate to modest growth, real estate not doing too badly. all the comments, i didn't finish counting them up, but the
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word fiscal and uncertainty both appear several times in the beige book, and the clear impression, bill, is that uncertainty over the fiscal situation is already hurting the economy, delaying hiring plans, capital investment plans and really everything from auto dealers in cleveland to farmers down in texas have cited the fiscal cliff as a major concern. that's something that's influencing their decision making right now. >> you would expect that given the fact that everybody is in lockdown mode as we wait to figure out what our tax rates are going to be, where the spending cuts are going to be, that it is going to impact the economy. my question is how much of an m impact going to see earnings? are they going to get hit? >> that's the key to the whole thing. as we said, the beige book numbers, when they came out there were cents. see earnings coming out, we will see comments and none are going to be positive. none will be excited about the future, and stock prices and multiples expand when people
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feel possible about the future. going to impact them? numbers might come in spot on. the whisper numbers, everyone is looking for, meaning hoping the numbers are a little bit bitter. i think as numbers come in, we'll start to see very little movement going north, unfortunately. >> the followup to that is how much of all of that is priced into the market? does the market react negatively or positively when in fact we see the earnings took a hit? >> in fact, rick santelli, had a slew of economic data out, the beige book and lieu it all the market is taking it all in stride. what are you making of this? >> no, absolutely. the five-year maturity, if you put a six-month chart really actentates how you can think that we had this huge selloff, but all we did is revisit the top of the range in december and early january, so i think that the treasury market fits right into what everybody is talking about. the uncertainty makes it different so interest rates will stay where they are at. remember, it's not only process of trying to solve the issues with the debt ceiling that are somewhat disturbing to the markets, the eventual solutions
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could be every bit as disturbing. >> and even bruce mccain with the uncertainties crowneding the economy and what's going on in washington, we've had big inflows into the market and to mutual funds and other things, and that's significant for you, isn't it? >> absolutely. we've seen a willingness to take more risk. i think the downside is that we're also seeing a bit of complacency come into the market, and with uncertainties, especially the fiscal cliff the sequel ahead of us, we think there's opportunities for some disruption of that positive feel-good feeling we're seeing in the market right now. >> all right. how do you want to allocate capital then, bruce? how are you investing in this environment? >> we think it's important not to be taking too little risk, so certainly making sure that you have adequate exposure, especially to things like the emerging markets where the fundamentals of growth are a lot better than they are in the united states is clearly important, but most of all making sure that you're taking in risk in line with what you
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can afford to take and not taking too much and not too little but really controlling it throughout the year. >> steve. is it possible that the beige report that we get today is sort of ancient history because things are becoming clearer now as far as the fiscal policy of the united states. we still have the debt crisis coming in a couple of months here to be resolved, but, you know, things do seem to be getting better. we've had some companies say that the housing market is for real right now, for example. >> yeah. i guess there's two different ways to think about it, bill. ancient history or crystal ball telling our future. i mean, when i read these comments, i see them very much as some of them seem to have come before the fiscal cliff deal was made but the other stuff comes in. there's some of the comments up on your screen there from the individual banks. i think that two things. i think, obviously, going over or hitting the debt ceiling is a big deal, but i think the run up to the debt ceiling, this is what the beige book is telling
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us, bill, the run-up is a big deal and the whole question. i'm not saying it's -- it's very important to solve these issues, but i think what the market wants, what investors want and probably what the american public wants is an understanding of the process of how we make a decision. i really think at this time our democracy and how we make decisions is entirely up in the air and unclear to most people. if business understood how we got to go, then i think there would be more clarity out there. you could operate a business. >> you know, steve, i have a question to you. i know it's basically fed policy under ben, under chairman greenspan not to wade into the actual mode to solve these issues, but isn't it a bit disingenuous of the fed to talk about all this uncertainty without making any comments as to hey, you guys, you need to deal with the debt. you need to deal -- >> but, they are. bernanke makes that comment a lot. he has said. >> says it all the time. >> more a solution. like telling them how to go about it. >> that's the problem the fed is
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in, at least bernanke has put himself in this position. he does not want to tell congress and the administration how to solve the problem. he just says you have to put it on a sustainable path. >> isn't he part of it? can't -- none of this really could have occurred if our servicing the debt was $800 billion a year and interest rates were a couple hundred basis points higher, so doesn't he have a responsibility? >> bernanke answer that had question, and he said, you know what? what would be better, that you would let interest rates rise and that would cost the go government more. >> that's not what i'm asking. low interest rates enabled the debt to accrue to the level it has. doesn't he have a moral responsibility to tell them ways to address it? >> absolutely. >> i mean, i don't think there's any question about that, exactly what you're saying. every time he talks, you almost feel as though what he's saying he wants to say more than what he is saying. what he needs to say is everything is in terrible shape. everything looks horrible and you better get your act straight
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because this country is going down the tube. >> he has said repeatedly when we go over the fiscal cliff, if we go over the fiscal cliff, we don't have any more tools. he says it a lot. >> it's even been stronger than that, maria. he has very much said what the beige book is saying right now which is that it's having a current effect. it's not in the future. >> agreed. >> i've got to say this. when we talk about interest rates, you know, staying low, objection remember, the government only can effectuate or affect the discount rate and the fed funds rate. most investors take that with the idea that their bonds that are mature in 10 years or 15 years aren't going to go down in value. they are, as we start to see interest rates rise and we're starting to see it, not on the short end, those people need to be very aware that they are going to lose purchasing power. they are going to lose the value of those bonds and people aren't aware that have. >> absolutely. you've got your fair share of critics out there of the federal reserve because of that point. u.s. officials, meanwhile, are telling nbc news today that
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three americans are among the at least 20 hostages taken by a terrorist group in algeria. michelle caruso-cabrera has more on this evolving story. >> the number of americans three, and in the last hour. two people died in the attack, including one british national. we don't know the nationality of the other. the attack occurred overnight at a natural gas facility in eastern algeria which is in northern africa. the facility operated as a joint venture between bp of the uk and stat oil of norway and the nigerian state oil company. u.s. defense secretary leon panetta while speaking to reporters in italy called this a terrorist attack so the u.s. will take, quote, all necessary and proper steps. we are showing you the actual facility in algeria. the google map, google earth. a group affiliated for al qaeda has claimed responsibility for the attacks, in retaliation for france's military intervention into the country of mali which borders algieria. france began that intervention last week to try to combat
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islamic militants that work in that country. the hostages include not only americans but french, british, norwegian, japanese and an irish citizen as well. and according to information about algeria on bp's website, algeria supplies 30% of europe's natural gas. bill, back to you. >> thank you very much, michelle. more as that story continues to unfold. meantime, headed towards the close. 50 minutes left. the dow down 20 points. virtually all of that attributable to the decline in boeing today f.boeing weren't down as much as it is, the dow would be unchanged right now. >> pretty extraordinary story going on in boeing. we're going to delve further into that. meanwhile, rocking with the bank earnings today. that's what is in focus. jpmorgan, goldman sachs and at u.s. bank core, we saw u.s. mortgage lending helping to drive growth. is the firm taking on too much risk in the housing market? we'll talk to chairman and ceo richard davis who is with us today. >> another day, another rally for research in motion, maker of the beleaguered blackberry.
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the stock is up 37% in the past month. and after the bell, how much is mobility impacting ebay's bottom line? did christmas surpass expectations or beat them? instant analysis coming up on the "closing bell." stay with us. [ male announcer ] you are a business pro. omnipotent of opportunity. you know how to mix business... with business. and from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a
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welcome back. earnings from goldman sachs and jpmorgan giving the earnings sector a boost bertha coombs joins us now with more. >> reporter: this is being called a make or break week for the financial sector. we've got two banking giants reporting tomorrow. bank of america and citigroup. b of a expected to report two cents a share on news of $21 billion which would be about a 16% lower set of revenue numbers than we saw a year ago. at citigroup analysts are looking for about a 10% increase in revenues with earnings of 96 cents per share. results from pnc and bb&t also on tap. on friday, we'll hear from morgan stanley. consensus estimates have come down over the past months, the street now looking for 27 cents a share on 7 billion in revenue. while regional banks state street and sun trust will be
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reporting. the earnings bar set high. jpmorgan posting a blowout quarter, earning $7.5 billion in the quarter. though ceo jamie dimon took a hit on his bottom line. his bonus chopped in half because of the $6.2 billion loss on that infamous london whale trade, but, still, he did get a $10 billion bonus. goldman sachs also posting profits well above estimates. cost-cutting help there and revenue climbing on strong trading and investment banking and u.s. bank core banking revenue was up 60% from a year ago but fell from its previous quarter, the ceo saying he expects a slower 2013 versus this past year, usb. today it's down fractionally. maria. >> all right, bertha, thank you so much. joining us now on a cnbc exclusive for more, here is richard davis, the chairman and ceo of u.s. bank corp. thanks for joining you go. so nice to see you. >> hi, maria.
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thank you very much. >> how would you characterize loan growth? it looks like it's continuing to fuel the earnings. are you seeing a transition from refis to more purchases in the home loan arena, or what can you tell us in terms of the characteristics of loans right now? >> you know, regarding mortgage loans, we're starting to see a very small turn from refis into purchase money. 69% of our loans last quarter were refinances, but that means that 71% were not and that's the highest number we've had in probably two years that. indicates that people are starting to find their opportunities and new products, new homes that perhaps aren't in distressed situations, and that's a very good sign for the value of homes and people getting back into a place where they feel the wealth effect of being a homeowner. >> how would you characterize the environment right now? so many mixed signals. you're seeing some bounce in housing related areas, and yet you've got the washington dysfunction, a real slowdown in the economy, and, of course, we all know that the low interest rate environment is making it tough in terms of margins >> i so, you know, for the loan side of it, to be a customer
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seeking a loan right now, it's a good time. that's why rates are low and that's one of the indications that the fed wants to get people to continue to buy and build. if you're a saver, it's not so good because the rates are low and you're not making as much money on the money you're saving. as regards to loans though, maria, across the board, seeing a very, very slow recovery and it's been 14 quarters since the recession was considered over, and would i say every single quarter it gets a little bit better, doesn't go backwards and i think the fiscal cliff debate probably softened things for a couple of weeks at years end. we're now past that and the debt ceiling is nowhere near as interesting to most of the consumers or business people at this stage so i think we'll probably move back to some normal slow recovery that will be methodical and take us to a very slightly better 2013 than 2012. >> how do you offset then the continued pressure on margins and, i mean, how long will the mortgage refinance continue to provide the growth there? >> yeah. so a bank like out, one of the reasons we do very well and enjoy a diversity of earnings is we have a large payments
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business and large corporate trust business so unlike some of our peers we're not wholly reliant on the balance sheet or on loan making. have great deposits and make good loans and have other alternatives, so for our company it's not quite as essential that the loan volume is as important as it might be in the future. i do see it to be a slow methodical progress towards refis moving down as rates go up, new purchase going into the replacement category, but i'll also tell you i don't think we'll see a big change in the next year. mortgage will stay strong as long as rates stay low. when rates go up, mortgages will fall and then the ball sheet for the bank starts to get strong somewhere else. >> what would you expect in terms of the spike in rates? you know, people are questioning whether or not we could see a market disruption, simply because people are worried about the debt. would you expect a fast and furious move in rates, and when? >> no. no. i don't, and not for a long time. i think the fed's got enough control over the rate scenario, and there's a long curve so it starts at one month and ends at
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ten years. there can be variations on the slope of the curve but overall not a big jump, won't be an epiphany moment where things will change dramatically but the more structured interest rate increase that we have, i guess unemployment needs to come down. that's going to be a very positive move on the intention of people to start buying and building things. >> sir, let me ask you about this recent downgrade from moody's. moody's downgraded your debt because they are saying your growth in the mortgage business could actually bring on more volatility, incremental volatility. >> right. >> and weaker earnings over time. >> right, you know, u.s. bank is the highest rated largest commercial bank in the country. it was before the downgrade, and it is after the downgrade, but one of the things i like about this is diversified earnings stream that we have, and mortgage becoming a little bit bigger for us, and we're a 5% market share owner market in mortgage business. it's something that they want to just keep an eye on and make sure we don't get overrated in any one category so for us the diversity is the reason we're corporated and they want us to
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be very careful not to get too big in one category. >> mr. davis, good to have you on the program. thanks very much. >> we'll see you soon. in the final stretch of trading. 40 minutes before the closing bell sounds for the day. market down just a fraction. >> good bank earnings but nothing tasty about chipotle's stock. getting hammered after giving investors tough news to swallow. when we come back, find out why this once recently beaten down stock was a darling. >> a stock once left for dead continues a resurrection. research in motion shares up better than 90% in the last month. how do you like that for return, bill? >> let me look on my blackberry and see what that means. >> today we might have a tangible reason why. the details up next. stay with us. [ male announcer ] staples is the number-one
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. welcome back. chipotle one of today's big losers after warning that higher food costs are taking a bite out of its warnings. courtney reagan is in miami today with the details. over to you, court. >> reporter: hi, maria. chipotle one of the companies getting a lot of attention here today at the icr exchange conference here in miami after the company issued a very late night release projecting its fourth-quarter profit will be below wall street's exexpectations. >> we still think this company is a good growth company.
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it's just showing deceleration on all the key metrix, and until those numbers kind of stabilize and the street starts to reflect, that we think there's downside in the stock. >> now they do have a sell rating on the stock but estimates were cut this morning because of the higher commodity costs as well as the overall general sluggishness of the casual diner. >> i think concerns about weak traffic in the restaurant space has a lot of investors sitting on the sidelines. we've got the payroll tax increase and that has some concerns that consumer spending will pull back. >> now back in october investor david einhorn said chipotle may be a bit short. i imagine somewhere he's probably smiling today. maria, back to you. >> coming up, more on how higher food prices are impacting the restaurant business when i speak exclusively to the ceo of
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wendy's. join us for that. over to you, bill. >> research in motion shares getting a boost today after visa approved the smartphone company's mobile payments system. you know, that stock is up 90%, more than 90% in the last three months. many think it will also be helped by the new blackberry 10 that is due out at the end of this month, so is there still room to run for rimm these days? on the technical side, jc o'hara and on the fundamental side jeff tomaceullo. jeff, it's like the phoenix rising from the ashes. is there more room to go? >> bill, if i was you, i'd be taking your profits and running right now. listen, rimm has put themselves in a position where the show is over and the audience is leaving and they are showing up now. last quarter they lost 1 million subscribers. they are not looking to make money until the end of 2014. bill, it's over. >> so you'd be taking profits
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here? >> i'd be taking profits. i'd be looking to short, because, listen, if you're the stock already and made 90%, i'm sure your stops will be triggered, and any kind of up move i would be looking to short this stock going forward. >> let me jump in here, this berry still has juice left in t.technically what i try to do is examine trends, and primarily i like to look at the start and the end of every trend. looking at a longer term chart of rimm, it looks like the downtrend in effect for multiple years is coming to an end. going from 2008 to 2011, we kiss that line. if we get a close above 15, this stock could be off to the races. >> j.c., you're right in a market if they were still the leader. they lost it. that's the problem. the market has changed on them. bill, let's take this, for example. it's like the pc market, right? you have how many operating systems out there? you have android and you have the ios. where is the room for rimm, and
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now you have microsoft making huge strides in the business application. so, rimm, again, showing up too late. >> could be showing up late but still a lot of investors. last time i looked there were still 130 million shares short out there. 19analysts with a sell, 19 with a sell and 4 with a buy. >> i heard this in lehman and enron before they went bankrupt. 60% up moves inny willman and 20% moves in enron are an they still went down and still went bankrupt. >> i'll tell you this. there is no middle ground. you either love it or absolutely hate it. good to see you both. thanks for joining us on talking numbers. >> breaking news right now an hewlett-packard and let's go to david faber. >> reporter: we reported on some of these headlines from dow jones saying there were offers incoming for the likes of hewlett-packard's autonomy oeds units. sources close to the company
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indicating to me that, in fact, there's no plan to sell any core assets at hewlett-packard, that they are not entertaining any offers to buy any of those core assets, and that, by the way, autonomy and eds are considered amongst company's core assets. a company in the midst of a significant turnaround in transition. my sources close to the company and close to the board of directors indicate that these kinds of conversations perhaps will resonate much more strongly, much later this year, if in fact there are no signs that the turnaround undertaken by ceo meg whitman is finding success but at this point they are not interested in trying to break up this company in any way, shape or form. no surprise that bankers got to do their job and make incoming or outgoing phone calls to companies and see if there's any interest. that's how they get paid. >> absolutely. david, thanks so much. as you saw, the market has been worsening as the david has been talking down. the market down 36 opinion on the dow jones industrial average. we are right about 30 minutes before the closing bell sounds for the day.
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former senator alan simpson told me yesterday he didn't think the republicans should use the debt ceiling as leverage to cut spending. >> i think that would be a grave mistake. i don't think that would solve anything. i know they are going to try it, and how far you go with that game of chicken i have no idea. >> and more and more republicans are agreeing with him, but utah governor gary herbert, he's not one of them. find out why he's willing to play that game of chicken straight ahead. later on, how badly will the debt ceiling fight end up hurting the economy? ahead, a member of one of the largest private equity firms will be here with his outlook. stay with us. me it...i've hooke. but there's one... one that's always eluded me. thought i had it in the blizzard of '93. ha! never even came close. sometimes, i actually think it's mocking me. [ engine revs ] what?! quattro!!!!! ♪
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welcome back. an increasing number of republicans are pushing back against the strategy to use the debt ceiling as leverage to actually get spending cuts out of president obama. >> yeah. john harwood is in washington with more on this evolving story. john? >> reporter: bill, it is evolving, and we're not going to note answer for some time. you know, while the high-profile issue of the day has been gun control, privately what you've got is members of both parties calibrating their strategy and figuring out how far they can press and what they can get for pressing hard. there are three basic questions that have to be resolved. one is do we have a short-term extension of the debt limit to
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allow more negotiations, or is it a longer term extension of a year or more? that's what the white house and democrats want. second of all, is it a clean debt limit extension? do republicans give in and say, okay, mr. president, we're not trying to hold the economy hostage and pass a clean debt limit extension, or do they make it a package deal with spending cuts as opposed to negotiating spending cuts in connection with the run out of government funding on march 27th or the budget sequester due to hit on march 1st? third, the question is if they do have a package deal, is that package deal spending cuts only, or is it also revenue in the president insisting on what he called a balanced approach with tax hikes as well as his news conference the other day and that's a question for republicans, whether they will go along with that and give in under the guise of tax reform for some additional revenue. all of those things are up in the air. democrats aren't sure what the house end game is. house republicans aren't sure what the senate republicans end game, is and within the
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republican caucus which is having a retreat later on today to decide the strategy sessions, they don't have a clear strategy yet at this moment. >> thanks so much. >> here we go again, right? >> here we go again. it's unbelievable. gary herbert of utah is among the republicans from utah who says we should be using the debt ceiling as leverage to cut spending. >> he's here to make the case. proponents like yourself say what other leverage would they have to extract some spending cuts from the democrats, but there are those who feel it's irresponsible to use the debt ceiling as a leverage point of some kind. what do you say? >> well, i think it's absolutely irresponsible that continue to spend like we're spending in washington, d.c. we've gone from borrowing 40 sent out of every dollar we're spending to now at 42 cents of every dollar we're spending and no end in sight. that's the irresponsibility. i think it's unfortunate and really disheartening that we
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don't -- that we have this even confrontation coming up. why don't we see some leadership out of the democrats and out of president where they say we understand we've got to have spending cuts and actually propose some. they have got some revenue enhancements already. we don't have to have a confrontation. just propose some spending cuts that make some sense, some entitlement reform and we'll move on together. >> right, right. what do you say to the fact that the president now has said this repeatedly, and that is that he's basically saying congress is not going to renege on things that congress approved. if you approved this spending, you can't not pay your bills now. >> i understand, that and i don't want to have the economy having any more trouble than it's already having. we've got to resolve the issue. the unfortunate part for the republicans, they don't have many cards to play here to try to get some sensibility when it comes to spending. everybody knows we're spending too much money. we've got to make some tough decisions, and we keep kicking
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the can down the road, postponing the inevitable and setting up another confrontation. this is a chance for president obama to broker the deal correctly for the good of the american people for generations to come. he needs to step up and say i understand we need to have more revenue, but we will have spending cuts that everybody understands has to happen. >> that's not what he's doing. that's not what he's doing. he came out with the gloves on the other day and said i'm not going to go down this road period. >> on the debt ceiling issue. >> on the debt ceiling. >> that's not what he's doing. that's the reality. >> the american public has got to step up and say we understand the government in washington is too bloated. we're spending more money than we take in. we eve got to live within our means. they ought to demand, the american public, that we quit the nonsensical spending. in states we're doing more with less. we've cut our budgets and we're providing better services now and a leaner more efficient fashion. the federal government should do the same thing, and president obama is the one person who can
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lead on this issue. grow the economy by bringing in some certainty to it. if he wants to fight hard for tax rate increases, he ought to be fighting just as hard for spending cuts. >> you know, governor, he made an interesting point during his news conference this week where he said if -- if this debate is just about reducing the fiscal deficit, he's on board and let's get it done, but he suspects that there are a lot of conservative republicans out there for whom this debate is about the bigger picture of the role the federal government plays in americans' lives, and he said that's not a debate he wants to have. he doesn't want to be cutting entitlement programs just because conservatives want to reduce the role of government in americans' lives. is it possible we're having two simultaneous debates at once here? >> well, he's got to reconcile the differences. almost like saying i know i'm overweight but don't ask me to go on a diet. i mean, there's got to be
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efficiencies found in the federal government. the fact that we're cutting spending doesn't mean that we don't continue to provide services to people. >> but it will take date where the spending cuts i made is the point he's making. you can talk about military cuts which is what he would i think be going after as opposed to the entitlement cuts that the republicans want to go after, but he sees that as an affront to the role of government in americans' lives right now. >> i know. he's not being realistic about where the spending is going though. we can freeze things across the board and probably make some advances here and just say whatever you had last year you'll have to live within your means next year with the same numbers of dollars, and actually not have legitimate cuts. we've got to do some drastic things. yeah, he talks about shared sack nice. everything should be on the table, including entitlements. you can't solve the deficit problem and our debt ongoing unless we in fact reduce our spending. the math doesn't work. >> let me ask you this. if you get spending cut ideas,
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are you going to agree to more tax increases? >> i think that's the negotiation that needs to happen. >> you want to go for more tax increases after the tax increases that went through on the fiscal cliff? >> i think closing loopholes, i think there has to be revenue enhancement and closing loopholes, already raised the tax rates, but there's got to be some spending cuts to go along with it. i'm not going to give away the store unless we get something in return. >> you did that already. did you that already at the end of the year? >> i'm not in congress thankfully. i'm running a very fiscally prudent state that's well managed and lives within its means and saves money for a rainy day and is growing the economy to produce more growth money by expanding a healthy economy. washington would do a lot to listen and watch what we're doing in utah because we're doing it right. >> you sure r.governor, thanks very much. appreciate your time today. >> thank you. >> we'll see you soon, governor. thank you. >> headed towards close, sort of meandering here, and much of the decline for the dow, down 32
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points, the result of boeing's decline today which we'll be talking about. >> up next, jpmorgan ceo jamie dimon takes a loss and a major change in the way morgan stanley is playi ining its employees as well. let's not say it's not what it used to be. >> after the bell, another problem with boeing's dreamliner that's forcing about half, get this, half of all dreamliners that have been delivered that are to be grounded right now. most of them in japan. and boeing's stock is a big reason the dow may end its winning streak. we'll have that story coming up. what's next?
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and now you're protected. welcome back. jpmorgan chase ceo jamie dimon takes a big pay day cut as the firm tries to close the book on the london whale saga. kayla tausche on that story. >> reporter: jamie dimon singled out in a report alongside details the trade that made them lose $6 million. dimon's pay was cut. he'll still take home $11.5 million for 2012, 10 million more he took in the financial crisis in 2009, but he now falls
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to the bottom of the bank executive pay pack. all big bank executives would best him except for b of a's brian moynihan who earned $8.1 million. even with executive pay under the microsoft, compensation for the troops won't be as bad as feared. at goldman sachs, which also reported earnings today, the industry's most used metric of compensation as a percentage of revenue actually fell four percentage point at goldman. meanwhile, jpmorgan's rose nearly two percentage points. that being said, maria, goldman and jpmorgan have been called for massive layoffs, unlike citigroup, bank of america and morgan stanley. those are the three banks still to report. guys, back to you. >> kayla, thanks so much. >> we're all embarrassed for jamie he only made $11 million last year too. bad. let's take a deeper dive into what's happening in the financial services industry. more evidence that wall street of the past is long gone? >> joining us anton schuts and cassandra tory of bell rock
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capital. good to see both of you. anton, what do you think are the changes that you see in terms of the banking sector going forward? seems like the wall street we once knew is certainly a thing of the past. there are a lot fewer investment banks, we know that, but with are we seeing real structural change when it comes to risk-taking, jobs, compensation? how do you see it? >> all of it. a lot of regulations. obviously what kills is leverage, and the firms of the past were more highly levered, had a lot less equity and took a lot of different types of risks, particularly with liquidity. the new banks have a lot more capital. they take a lot less risk and they still obviously do take risk, but they are carrying a lot of capital against, it a lot of liquidity and assets that don't earn a whole lot so a return on equity is tough to come by. also in a position right now because it's been so tough for so long to pay employees a lot less and employees are less likely to leave because employees are less likely to give them more money to give them their shot. you can see that across the
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entire industry that operating leverage is back in the wall street firm's favor at this point in time and goldman sachs -- >> go ahead, finish your thought, i'm sorry. >> goldman sachs, its revenue is up 12 pass last year yet its comp is up only 5%, 6% so true operating leverage achieved in a very tough environment. >> what do you think, cassandra? we all know how slickial wall street can be. is this another cycle that it will come back at some point and let's face it. why should the individual investor care what's going on in wall street right now? >> well, let me start with that, bill, because, first of all, you should care because if you went back and did calculations on how much shareholder equity and book value goldman could have given to their investors over the last ten years, if they hadn't paid out the large compensation packages, it would be mind-blowing, and you should care if you are an investor because it's coming out of your pocket. that's not to say it's not important to pay these people well, but, you know, i'm not
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crying for them that -- that the numbers on a percentage of revenue weren't when they were last year because that's really out of the question. >> i think they would argue they couldn't have kept that talent if they didn't have that kind of a bonus plan, don't you think? >> that's true, but i think maybe not to the same extent that they were. when you really look at the profitability that they took and gave to their employees. i think that at the end of the day wall street is still made up of people that are risk-takers fundamentally, and that's what makes it a profitable business model overall. that has to be targeted a little bit towards tying it to compensation though. >> but you can't say that main street should not care about what happens on wall street, because the fact is wall street is enabling the financing of so much. so if main street wants that bridge built down the block or that school put up around the corner, they are going to go to wall street to get the financing done, and a firm like goldman
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sachs is enabling so many other businesses to get things done to actually create jobs, so that's why main street should care about wall street is doing. >> they should. >> anton, i guess the overall question from your standpoint and from our viewers, which they probably want to know, is this still an investable group? you just confirmed for us that, yes, we are seeing real structural change in the banking sector and that will continue. is it still investable the way it was over the prior several decades. >> well, i think in the near term, you know, like i said, the compensation structure is going to be much better. there's a lot of great bodies available on the street that you can hire and you don't have to pay them as much as you used to be able, to so i think that will keep it down, and if you ever do get past this debt ceiling, i think the economy wants to go. you sort of feel it. this latent demand out there. everybody wants to get back to normal, and if we get back to normal, the evaluations are still pretty incredible, the biggest best companies are trading below book value.
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strooe trades at a value of book and jpmorgan trades at eight times forward earnings. there's really cheap valuations in this group. this group is run very, very quickly and set you a lot of technical levels and the some would say it's overbought but if you have any sort of time horizon i think there's a lot of money still to be hate in these names. i wouldn't be surprise federal we have a pullback in the debt ceiling negotiations. >> very quickly, cassandra. >> i think we're at gunning of a new bull market for the banks. i think there is a far, far more upside. it's a sector that people need to be overweighted in, and i think because of the housing crisis really behind us, you're going to see a tremendous amount of bick value being built over the next couple of years. it's just starting. we just started to see that in jpmorgan's earnings today, and check out what b of a does tomorrow because i think you're going to see the same thing happen with them. >> all right. >> tremendous upside. >> as we've seen. the financials have been a
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leader in this market the last couple of years. thank you both for your thoughts today. appreciate it. >> my pleasure. >> and a correction from my observation in yesterday's program on the new landscape for the banking sector. the piece included a point about morgan stanley's ceo james gorman's compensation. mr. gorman's pay in 2010 was $14 million n.1411 it was 10.5 million. it's expected to be down from those numbers in 2012 which is yet to be reported. the $130 million compensation cited yesterday was a total for the five senior executives at the firm. cnbc regrets the errors. my apologies to mr. gorman. >> all right. heading towards the close here with the dow still down about 27, about 30 point here. >> wendy's just raised prices on some items on its value menu, but will the company have to raise prices akos the board if food prices continue to increase? >> and if you want to be a ceo one day, and why wouldn't you be? you may be surprised by becoming what's practically a requirement
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for the job. put it this way. you better start working out and eating salads.
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we've had some big movers today even though the broader markets are sweeping wildly. apple, for example, all is well with the world again. apple back above $500 a share. >> vanessa, sharp decline there. have you to wonder what's with that. is it because it got too high, or are there real sort of, you know, upsets in the armor? >> that is the big question obviously. dell continues lower today after that big rally early this week on word that it's talking about going private. they are lining up equity investors. they are lining up banks to provide some financing on the whole thing, but maybe a little profit-taking today. down about 4.5% right now. there is serious talk about them trying to take this thing private. >> faber says we could have a deal within two weeks and new highs for the bank. this group is really on fire. take a look. earnings news really driving things today. fractional moves and nonetheless on the upside, had a fantastic
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2012. >> i think they are still in recovery mode from the financial crisis, and we're slowly making the transition out to growth mode. >> you know what i mean, especially if the housing market continues to improve and loan growth picks up because of capital spending in this country. if that starts to pick up, then you'll start to really see some tracks for the bank stocks. >> of course, that's the capital plans on the part of the banks. they have all put their plans forward and now we have to get the okay from the federal reserve in terms of buyback and dividend increases which investors are certainly expecting. >> not finished. come back with the closing countdown and get you ready for after the bell. earnings coming out. >> and minutes away from ebay's earnings. instant analysis of the numbers coming up and don't miss my exclusive interview with obey's ceo, mr. donahoe. you're watching cnbc, first in business worldwide.
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